Dimensional Emerging Markets Value ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy merits a Below Average Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm a High Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Vail Resorts

Asbury Automotive Group

Apeiron Capital Investment Corp

Aduro BioTech

Seaspan

Energy Transfer Equity

Adams Natural Resources Fund Inc

Pimco Income Opportunity Fund

Remark Hlds

AlerisLife

The fund’s strong value tilt can pull its holdings toward volatile stocks that don’t always compensate investors for their high risk. As such, it has been assigned a Below Average Process Pillar rating. 

In establishing its value tilt by setting its opportunity set as the bottom 33% of the emerging-markets universe, the fund is somewhat limited against peers who have less restricted investment strategies that make better use of and better represent the underlying opportunity set.

Active managers in the global emerging-markets equity sector are known for their flexibility and diverse investment strategies, with a significant portion of these funds aligning with the large-blend style. Rather than solely focusing on value-oriented approaches, they often integrate a mix of growth and value tactics, adapting to market changes. This flexibility allows them to take advantage of a broad range of opportunities, from traditional value plays to high-growth scenarios, offering a dynamic approach to portfolio management.

To manage trading and rebalancing costs, Dimensional removed this strategy’s 17.5% country cap on Oct. 1, 2019, a transition that was completed September 2020. While much of the portfolio’s major country allocations remain unchanged, its China allocation now sits at around 25%-30%, representing a closer step toward the concentration risk concerns associated with China allocations in the emerging-markets category. 

The managers start with stocks listed in emerging-markets countries, excluding REITs, regulated utilities, and those with market caps of less than USD 50 million. They sort qualifying firms by price/book and target those landing in the cheapest third. They weight the small-cap stocks in the portfolio by market cap and filter out some of the least profitable and most expensive names that make the cut. They take a different approach in the large-cap segment, using multipliers to assign weightings that scale a stock’s market cap. Stocks with smaller market caps, lower valuations, and higher profitability receive larger multipliers than those with opposite characteristics. This allows a stock’s weighting to float with changes in its price and keeps turnover in check while preserving the fund’s value orientation.

The fund’s investment process defines profitability as a variation of EBITDA, which focuses on operating income instead of earnings as a stable measure of business income and is scaled by book. When unscaled, however, the average weighted profitability of the portfolio by most metrics is consistently lower than an MSCI Emerging Markets Value Index portfolio that doesn’t incorporate any profitability objectives. This is reflective of the investment strategy’s priority for value small-cap exposure over profitability and quality.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point) Morningstar maps the covered vehicle’s Process Pillar to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning Process Pillar ratings to vehicles that follow the same strategy.

Below Average

Process

Dimensional's investment and implementation are overseen by an investment research committee and investment committee. The former considers investment research and provides analysis and advises strategy enhancements and new strategies to the latter. It includes leading academics such as Eugene Fama and Kenneth French. The latter includes senior executives and portfolio managers. It is responsible for establishing investment processes and provides ultimate oversight for all portfolios.

The portfolio management and trading teams carry out the established policies and procedures for investment strategies and make daily decisions regarding the portfolios. This team approach enables investment professionals to broaden their abilities, promotes employee retention, and mitigates the impact of a professional’s departure or unavailability. The key day-to-day players are spread worldwide. At the senior level, turnover has generally been moderate, and even when turnover spikes, the firm copes well thanks to its systematic approach. Globally, it's a high-caliber outfit with more than 300 investment professionals across six countries. 

Paul Foley is the head of EMEA Portfolio Management. Foley oversees all portfolio management activities in London and reports to Nathan Lacaze, co-chief executive officer at Dimensional UK. Lacaze previously held these responsibilities in addition to his co-CEO role. Foley previously served as senior portfolio manager and vice president of Dimensional UK. Before that he was a portfolio manager. Foley joined Dimensional in 2003 on the trading team. He holds a bachelor’s in business studies from the University of Portsmouth and is a CFA charterholder.

The investment Asia-Pacific team is highly experienced with long tenures at Dimensional and has demonstrated stability over the past few years. The systematic nature of the investment processes and implementation mechanics minimizes the potential impact of personnel changes, underscoring the importance of a good team fit in line with Dimensional's investment philosophy. While there have been no changes in the portfolio management team, Dimensional Australia did see a change in leadership in October 2022. Glenn Crane stepped down as CEO of DFA Australia at the end of 2022 and was succeeded by Bhanu Singh, the head of the Asia-Pacific portfolio management team, effective Jan. 1, 2023. Singh, who continues to fulfil his portfolio management responsibilities, is well supported by senior portfolio manager Rob Ness, a long-term Dimensional veteran with nearly two decades of experience. This leadership transition is not expected to cause any changes to the fund management processes or have any other impact from an investor’s perspective, further underscoring the robustness of the management team for the product.

Note: The People Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point), Morningstar maps the covered vehicle’s People Pillar ratings to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning People Pillar ratings to vehicles that follow the same strategy.

Above Average

People

Dimensional’s mutual fund business has faced some tough challenges over the past few years. Despite large and persistent outflows, the firm has remained steadfast in its philosophy and responded in a way that benefits clients while improving its competitiveness. Dimensional maintains its High Parent Pillar rating.

More than $80 billion left Dimensional’s mutual funds between 2020 and 2022, but its response to the turmoil has been admirable. The firm started reducing fees in early 2020, and it continued the effort with three additional rounds of cuts.

Dimensional’s endeavor into exchange-traded funds was the biggest step it took to shore up its business. The firm converted seven tax-managed mutual funds to ETFs between mid-2021 and mid-2022. Along the way, it launched an additional two dozen that largely follow the same strategies underpinning the existing mutual funds. The firm also reinvested in its separate accounts platform by bolstering the technology used to manage these portfolios. The effort was aimed at improving operational efficiencies.

These measures appear to be paying off. The firm’s new ETFs have proved popular among its clients. In 2022, they brought in enough new money to nearly offset the outflows from its mutual funds. The separate account platform’s operational improvements, along with the new ETF lineup’s tax efficiency, should benefit clients and strengthen the firm’s prospects.

High

Parent

Dimensional Emerging Markets Value ETF

DFEV actively selects emerging markets securities of all sizes exhibiting value characteristics, seeking to provide long-term capital appreciation.

CSOP FTSE China A50 ETF

Xtrackers Harvest CSI 300 China A-Shares ETF

Xtrackers Harvest CSI 500 China A-Shares Small Cap ETF

Xtrackers MSCI China A Inclusion Equity ETF

Avantis Emerging Markets Equity ETF

Avantis Emerging Markets Value ETF

VanEck Vectors Brazil Small-Cap ETF

Direxion Daily MSCI Brazil Bull 2X Shares

ProShares UltraShort MSCI Brazil Capped

Morgan Stanley China A Share Fund Inc

Direxion Daily CSI 300 China A Share Bull 2X Shares

VanEck Vectors ChinaAMC SME-ChiNext ETF

iShares MSCI China A ETF

WisdomTree China ex-State-Owned Enterprises Fund

Xtrackers MSCI Emerging Markets Hedged Equity ETF

Franklin Emerging Market Core

Direxion Daily Emerging Markets Bull 3X Shares

Direxion Daily Emerging Markets Bear 3X Shares

iShares MSCI Emerging Markets ETF

ProShares Ultra MSCI Emerging Markets

ProShares UltraShort MSCI Emerging Markets

Xtrackers Emerging Markets Carbon Reduction and Climate Improvers ETF

Templeton Emerging Markets Fund

Global X Next Emerging & Frontier ETF

iShares MSCI Emerging Markets ex China ETF

WisdomTree India Earnings Fund

iShares MSCI EM ESG Optimized ETF

ProShares Short MSCI Emerging Markets

iShares MSCI Brazil ETF

iShares MSCI Brazil Small-Cap ETF

First Trust Brazil AlphaDEX Fund

First Trust Emerging Markets AlphaDEX Fund

Franklin FTSE Brazil ETF

Franklin FTSE India ETF

iShares MSCI Frontier 100 ETF

Freedom 100 Emerging Markets ETF

iShares Currency Hedged MSCI Emerging Markets ETF

iShares Core MSCI Emerging Markets ETF

Morgan Stanley India Investment Fund Inc

Columbia India Consumer ETF

iShares MSCI India ETF

Nifty India Financials ETF

Direxion Daily MSCI India Bull 2X Shares

iShares India 50 ETF

JPMorgan Emerging Markets Equity Core ETF

KraneShares MSCI All China Index ETF

KraneShares Bosera MSCI China A Share ETF

KraneShares SSE STAR Market 50 Index ETF

iShares ESG MSCI EM Leaders ETF

PIMCO RAFI Dynamic Multi-Factor Emerging Markets Equity ETF

First Trust India NIFTY 50 Equal Weight ETF

Invesco India ETF

First Trust RiverFront Dynamic Emerging Markets ETF

Hartford Multifactor Emerging Markets ETF

Schwab Emerging Markets Equity ETF

iShares MSCI India Small Cap ETF

SPDR Portfolio Emerging Markets ETF

Vanguard FTSE Emerging Markets ETF

WisdomTree Emerging Markets ex-State-Owned Enterprises Fund

Emerging markets continued to expand at a solid pace midway into the first quarter of 2024, supported by broad-based expansion across both manufacturing and service sectors.

Emerging Markets Growth Remains Solid Amid Intensifying Inflationary Pressures

Avantis Emerging Markets Small Cap Equity ETF

Dimensional Etf Trust-Dimensional Emerging Markets High Profitability Etf

iShares MSCI Emerging Markets Small Cap ETF

iShares JP Morgan USD Emerging Markets Bond ETF

Overseas markets, particularly emerging markets, are expected to offer the best stock returns over the next decade. EM stocks trade at historically low valuations compared to the US and other international stocks.

The Case For Emerging Markets

Avantis International Small Cap Value ETF

Avantis US Equity ETF

Avantis U.S. Small Cap Value ETF

Vanguard Total Bond Market ETF

Capital Group Dividend Value ETF

Capital Group Growth ETF

Dimensional US Core Equity 2 ETF

Dimensional International Core Equity Market ETF

Dimensional Core Fixed Income ETF

Dimensional Emerging Markets Core Equity 2 ETF

Dimensional International Core Equity 2 ETF

Dimensional International Value ETF

Dimensional US Equity ETF

Dimensional US High Profitability ETF

Fidelity Total Bond ETF

First Trust TCW Opportunistic Fixed Income ETF

Janus Henderson AAA CLO ETF

JPMorgan Equity Premium Income ETF

JPMorgan Nasdaq Equity Premium Income ETF

Janus Henderson Mortgage-Backed Securities ETF

Putnam ESG Core Bond ETF

PGIM Ultra Short Bond ETF

And, plenty of ink has been spilled about how much money has gone into active ETFs in 2023, and from a pure top-line flows perspective, it's true. A significant chunk of the $289 billion that has entered U.S.-listed ETFs year to date went into active products — 22%, in fact.

2023's Overactive Active ETF Flows Are Mostly a Mirage

Investors should consider the opportunities in developing economies and the advantages of systematic, active emerging market exchange traded fund strategies.

Active ETF Strategies to Better Navigate the Emerging Markets

Dimensional has applied a systematic yet flexible approach in its emerging markets strategies for nearly three decades. The firm recently expanded its offering to include exchange traded funds (ETFs), including emerging markets strategies.

How a Systematic Active Approach Can Pinpoint Opportunities in Emerging Markets

Dimensional Fund Advisors has expanded its suite of ETFs with the launch of three new ETFs which offer broadly diversified exposure to core, value, and high profitability equities within emerging markets. The new funds, listed on the NYSE on April 27, are the Emerging Markets Core Equity 2 ETF (DFEM), the Emerging Markets Value ETF (DFEV), and [.

Dimensional Launches 3 New Emerging Markets Equity ETFs

The issuer launched funds offering different angles on developing markets.

Dimensional Rolls Out 3 Emerging Market ETFs

News for Dimensional Emerging Markets Value ETF ETF (DFEV)